Mortgage refinancing is expected to experience a "very steep drop" in 2011 compared with 2010, according to Michael Fratantoni, vice president of research and economics at the Mortgage Bankers Association in Washington, D.C.

The prospect of higher interest rates on home loans is one reason for that outlook, but not the only reason.

Homeowners who have ample equity, sterling credit and steady employment probably refinanced at least once in 2009 or 2010, locking in low fixed rates and consequently, have little or no incentive to refinance again in 2011, Fratantoni says.

Those who didn't refinance in the last two years due to inadequate equity, unstable employment or impaired credit probably won't do so this year either because, while still-low interest rates may create an incentive, those challenges will remain to be overcome.

"Trillions of dollars' of mortgages that, on paper, look like they would be candidates, haven't (refinanced) yet, and we don't see them as a large factor in the year ahead," Fratantoni says.

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